Market Overview

Dynatrace Reports Second Quarter of Fiscal Year 2021 Financial Results

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  • Subscription revenue of $157.7 million, up 36% year-over-year, 35% on a constant currency basis
  • ARR of $638.1 million, up 35% year-over-year, 33% on a constant currency basis
  • GAAP EPS of $0.06 and non-GAAP EPS of $0.18

Software intelligence company Dynatrace (NYSE:DT), today released financial results for the second quarter of its fiscal 2021 ended September 30, 2020.

"Dynatrace delivered strong second quarter results, exceeding our guidance on all key metrics," said John Van Siclen, Chief Executive Officer. "As digital transformation continues to accelerate, so does the scale and complexity of the dynamic multiclouds supporting these initiatives. Our lead in unified platform, automation and intelligence sets us apart in observability at scale as we enable digital teams to transform the way they work, shifting them from manual and reactive intervention to proactive optimization and accelerated innovation."

Second Quarter Fiscal 2021 and Other Recent Business Highlights:

All growth rates are compared to the second quarter of fiscal 2020 unless otherwise noted.

Financial Highlights:

  • Total Revenue of $168.6 million, an increase of 30% as reported and on a constant currency basis
  • Total ARR of $638.1 million, an increase of 35% as reported, and 33% on a constant currency basis
  • Subscription revenue of $157.7 million, an increase of 36% as reported, and 35% on a constant currency basis, and representing 94% of total revenue
  • GAAP Operating Income of $22.8 million and Non-GAAP Operating Income of $53.3 million
  • GAAP EPS of $0.06 and non-GAAP EPS of $0.18

Business Highlights:

  • Extended coverage of Infrastructure metrics to all AWS CloudWatch and Azure Monitor services and a rapidly expanding set of Google Cloud Platform Monitoring services. Now nearly 500 technologies and services supported automatically by the Dynatrace OneAgent, Smartscape and Davis AI.
  • Continued recognition by industry analysts for observability platform leadership adding the top spot in ISG's Cloud Native Observability Quadrant and named one of the winners in Gartner's Peer Insights Customers' Choice for Application Performance monitoring.
  • Increased customer value and reach through expanding partner ecosystem, including a deeper AIOps partnership with ServiceNow and the launch of a Cloud Partner Competency Program to help organizations find the best Dynatrace capable partners to accelerate digital transformation.

Second Quarter 2021 Financial Highlights

(Unaudited – in thousands, except per share amounts)

 

 

Three Months Ended September 30,

 

2020

 

2019

Annualized recurring revenue

$

638,063

 

 

$

470,906

 

Year-over-Year Increase

35

%

 

 

 

 

 

 

Annualized recurring revenue - constant currency (*)

$

628,644

 

 

$

470,906

 

Year-over-Year Increase

33

%

 

 

 

 

 

 

Revenues:

 

 

 

Total revenue

$

168,586

 

 

$

129,378

 

Year-over-Year Increase

30

%

 

 

 

 

 

 

Total revenue - constant currency (*)

$

167,741

 

 

$

129,378

 

Year-over-Year Increase

30

%

 

 

 

 

 

 

Subscription revenue

$

157,673

 

 

$

115,805

 

Year-over-Year Increase

36

%

 

 

 

 

 

 

Subscription revenue - constant currency (*)

$

156,906

 

 

115,805

 

Year-over-Year Increase

35

%

 

 

 

 

 

 

Non-GAAP operating income (*)

$

53,259

 

 

$

29,787

 

Non-GAAP operating margin (*)

32

%

 

23

%

 

 

 

 

Non-GAAP net income (*)

$

52,581

 

 

$

17,666

 

 

 

 

 

Non-GAAP net income per share - diluted

$

0.18

 

 

$

0.07

 

 

 

 

 

Non-GAAP shares outstanding - diluted

286,252

 

 

269,985

 

 

 

 

 

Unlevered Free Cash Flow (*)

$

40,514

 

 

$

27,159

 

* Use of Non-GAAP Financial Measures

In our earnings press releases, conference calls, slide presentations, and webcasts, we may use or discuss non-GAAP financial measures, as defined by Regulation G. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements. Our earnings press releases containing such non-GAAP reconciliations can be found in the Investors section of our website at https://ir.dynatrace.com.

Financial Outlook

Based on information available, as of October 28, 2020, Dynatrace is issuing guidance for the third quarter and raising full year fiscal 2021 as follows:

Third Quarter of Fiscal Year 2021:

  • Total revenue is expected to be in the range of $171.0 million to $173.0 million, 19% to 21% growth as reported, and 18% to 20% on a constant currency basis
  • Subscription revenue is expected to be in the range of $160.5 million to $162.0 million, 25% to 26% growth as reported, 24% to 25% on a constant currency basis
  • Non-GAAP operating income is expected to be in the range of $43.0 million to $45.0 million
  • Non-GAAP net income is expected to be in the range of $36.0 million to $38.5 million
  • Non-GAAP net income per diluted share is expected to be in the range of $0.12 to $0.13, based on a range of 289 million to 290 million diluted weighted-average shares outstanding

Full Year Fiscal 2021:

  • Total revenue is expected to be in the range of $668.0 million to $675.0 million, 22% to 24% growth as reported and on a constant currency basis
  • Subscription revenue is expected to be in the range of $624.0 million to $630.0 million, 28% to 29% growth as reported and on a constant currency basis
  • Total ARR is expected to be in the range of $721.0 million to $727.0 million, 26% to 27% growth as reported, and 25% to 26% on a constant currency basis
  • Non-GAAP operating income is expected to be in the range of $186.0 million to $191.0 million
  • Non-GAAP net income is expected to be in the range of $158.0 million to $164.0 million
  • Non-GAAP net income per diluted share is expected to be in the range of $0.55 to $0.57, based on a range of 288 million to 290 million diluted weighted-average shares outstanding
  • Total unlevered free cash flow is expected to be in the range of $192.0 million to $200.0 million, 29% to 30% of revenue

Our guidance is based on foreign exchange rates as of September 30, 2020 for entities reporting in currencies other than U.S. Dollars.

While we believe we are in a strong financial position to weather the impact to our business from COVID-19, many of our customers and prospects are operating under very challenging circumstances and may reduce or re-evaluate their spend. As such, in our third quarter and full year 2021 guidance we factor in the expected impacts of COVID‑19 on our business and results of operations based on information available to us today. Our outlook assumes a continued challenging economic environment and incorporates a wider range of outcomes for the remainder of the fiscal year. Significant variation from these assumptions could cause us to raise, lower or modify our expectations and our guidance, and we undertake no obligation to update our assumptions, expectations or our guidance. These statements are forward-looking, and actual results may differ materially, as further discussed below under the heading "Cautionary Language Concerning Forward-Looking Statements".

Reconciliation of non-GAAP operating income, non-GAAP net income, non-GAAP net income per share and unlevered free cash flow guidance to the most directly comparable GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures; in particular, the measures and effects of share-based compensation expense, employer taxes and tax deductions specific to equity compensation awards that are directly impacted by future hiring, turnover and retention needs, as well as unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

Conference Call and Webcast Information

Dynatrace will host a conference call today, October 28, 2020, to discuss its results and business outlook at 8:00 a.m. Eastern Time. The call will be accessible by telephone at 833-714-0933 (or 833-714-0959 for international calls) and using passcode 3256426. A live webcast of the call may be accessed on the Company's website at https://ir.dynatrace.com.

An audio replay will be available for two weeks following the conference call and webcast, The hear the replay, interested parties may go to https://ir.dynatrace.com or dial 800-585-8367 (or 416-621-4642 for international calls) and using passcode: 3256426.

The company has used, and intends to continue to use, the investor relations portion of its website as a means of disclosing material non-public information and for complying with disclosure obligations under Regulation FD.

Non-GAAP Financial Measures & Key Metrics

In addition to disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain certain non-GAAP financial measures. As of the second quarter of Fiscal Year 2021, we adjusted certain of our non-GAAP metrics for employer payroll tax expense related to equity incentive plans, as the amount of employer payroll tax expense is dependent on our stock price and other factors that are beyond our control and does not correlate to the operation of our business. Our historical presentation of these metrics below has been updated to reflect these adjustments for consistency.

Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. Dynatrace considers these non-GAAP financial measures to be important because they provide useful indicators of its performance and liquidity measures. These are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans. In addition, investors often use similar measures to evaluate the performance of a company. Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company's operating performance. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP financial measures presented by other companies. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements.

Dynatrace presents constant currency amounts for Revenue and Annual Recurring Revenue to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. All growth comparisons relate to the corresponding period in the last fiscal year. Dynatrace provides this non-GAAP financial information to aid investors in better understanding our performance.

Adjusted EBITDA is defined as Net Income (loss) adjusted by removing the impact of our capital structure (net interest income or expense from our outstanding debt), asset base (depreciation and amortization), tax consequences, restructuring and other gains and losses, transaction and sponsor related costs, gains and losses on foreign currency, stock-based compensation and employer payroll tax expense related equity incentive plans.

Annual Recurring Revenue "ARR" is defined as the daily revenue of all subscription agreements that are actively generating revenue as of the last day of the reporting period multiplied by 365. We exclude from our calculation of Total ARR any revenues derived from month-to-month agreements and/or product usage overage billings.

Dynatrace Net Expansion Rate is defined as the Dynatrace® ARR at the end of a reporting period for the cohort of Dynatrace® accounts as of one year prior to the date of calculation, divided by the Dynatrace® ARR one year prior to the date of calculation for that same cohort. This calculation excludes the benefit of Dynatrace® ARR resulting from the conversion of Classic products to the Dynatrace® platform.

Dynatrace customers are defined as accounts, as identified by a unique account identifier, that generate at least $10,000 of Dynatrace® ARR as of the reporting date. In infrequent cases, a single large organization may comprise multiple customer accounts when there are distinct divisions, departments or subsidiaries that operate and make purchasing decisions independently from the parent organization. In cases where multiple customer accounts exist under a single organization, each customer account is counted separately based on a mutually exclusive accounting of ARR.

Adjusted EBITDA/Net Debt Leverage Ratio is defined as our Net Debt divided by our trailing twelve month Adjusted EBITDA. Net Debt is defined as total principal less cash and cash equivalents.

Unlevered Free Cash Flow is defined as net cash provided by (used in) operating activities and adjusted to exclude cash paid for interest (net of tax), non-recurring restructuring and acquisition related costs, along with costs associated with one-time offerings and filings, less cash used in investing activities for acquisition of property and equipment. However, given our debt obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

About Dynatrace

Dynatrace provides software intelligence to simplify cloud complexity and accelerate digital transformation. With automatic and intelligent observability at scale, our all-in-one platform provides answers about the performance of applications, the underlying infrastructure, and the experience of all users to enable organizations to innovate faster, collaborate more efficiently, and deliver more value with dramatically less effort. That's why many of the world's largest enterprises trust Dynatrace® to modernize and automate cloud operations, release better software faster, and deliver unrivaled digital experiences.

Cautionary Language Concerning Forward-Looking Statements

This press release includes certain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding management's expectations of future financial and operational performance and operational expenditures, expected growth, and business outlook, including our financial guidance for the third fiscal quarter and full year 2021, and statements regarding the size of our market and our positioning for capturing a larger share of our market. These forward-looking statements include, but are not limited to, plans, objectives, expectations and intentions and other statements contained in this press release that are not historical facts and statements identified by words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" or words of similar meaning. These forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by those forward-looking statements are reasonable, we can give no assurance that the plans, intentions, expectations or strategies will be attained or achieved. Furthermore, actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond our control including, without limitation, the effect of the COVID-19 pandemic on our business operations and demand for our products as well as its impact on general economic and financial market conditions, our ability to maintain our subscription revenue growth rates in future periods, our ability to service our substantial level of indebtedness, market adoption of software intelligence solutions for application performance monitoring, digital experience monitoring and infrastructure monitoring, continued spending on and demand for software intelligence solutions, our ability to maintain and acquire new customers, our ability to differentiate our platform from competing products and technologies; our ability to successfully recruit and retain highly-qualified personnel; the price volatility of our common stock, and other risks set forth under the caption "Risk Factors" in our Form 10-K filed on May 27, 2020 and our other SEC filings. We assume no obligation to update any forward-looking statements contained in this document as a result of new information, future events or otherwise.

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited – In thousands, except per share amounts)

 

 

Three Months Ended

September 30,

 

Six Months Ended

September 30,

 

2020

 

2019

 

2020

 

2019

Revenue:

 

 

 

 

Subscription

$

157,673

 

 

$

115,805

 

 

$

302,030

 

 

$

223,933

 

License

442

 

 

2,745

 

 

1,080

 

 

6,529

 

Service

10,471

 

 

10,828

 

 

20,984

 

 

21,466

 

Total revenue

168,586

 

 

129,378

 

 

324,094

 

 

251,928

 

Cost of revenue:

 

 

 

 

Cost of subscription

18,327

 

 

23,456

 

 

35,033

 

 

39,633

 

Cost of service

8,554

 

 

11,847

 

 

16,564

 

 

20,656

 

Amortization of acquired technology

3,830

 

 

4,243

 

 

7,656

 

 

8,800

 

Total cost of revenue

30,711

 

 

39,546

 

 

59,253

 

 

69,089

 

Gross profit

137,875

 

 

89,832

 

 

264,841

 

 

182,839

 

 

 

 

 

 

Operating expenses:

 

 

 

 

Research and development

27,512

 

 

46,596

 

 

51,017

 

 

72,255

 

Sales and marketing

56,690

 

 

99,966

 

 

105,853

 

 

158,181

 

General and administrative

22,110

 

 

86,953

 

 

43,637

 

 

118,835

 

Amortization of other intangibles

8,686

 

 

10,061

 

 

17,372

 

 

20,203

 

Restructuring and other

46

 

 

779

 

 

25

 

 

894

 

Total operating expenses

115,044

 

 

244,355

 

 

217,904

 

 

370,368

 

Income (loss) from operations

22,831

 

 

(154,523

)

 

46,937

 

 

(187,529

)

Interest expense, net

(3,602

)

 

(14,534

)

 

(7,715

)

 

(33,720

)

Other income, net

199

 

 

146

 

 

218

 

 

240

 

Income (loss) before income taxes

19,428

 

 

(168,911

)

 

39,440

 

 

(221,009

)

Income tax expense

(1,949

)

 

(248,423

)

 

(9,096

)

 

(245,480

)

Net income (loss)

$

17,479

 

 

$

(417,334

)

 

$

30,344

 

 

$

(466,489

)

Net income (loss) per share:

 

 

 

 

Basic

$

0.06

 

 

$

(1.58

)

 

$

0.11

 

 

$

(1.86

)

Diluted

$

0.06

 

 

$

(1.58

)

 

$

0.11

 

 

$

(1.86

)

Weighted average shares outstanding:

 

 

 

 

Basic

280,077

 

 

264,127

 

 

279,577

 

 

251,412

 

Diluted

286,252

 

 

264,127

 

 

285,423

 

 

251,412

 

UNAUDITED SHARE-BASED COMPENSATION

 

 

 

Three Months Ended

September 30,

 

Six Months Ended

September 30,

 

 

2020

 

2019

 

2020

 

2019

Cost of revenue

$

1,866

 

$

12,720

 

$

3,364

 

$

16,029

Research and development

2,989

 

27,379

 

5,407

 

34,506

Sales and marketing

6,122

 

56,781

 

11,527

 

71,885

General and administrative

3,854

 

57,866

 

7,205

 

73,751

Total share-based compensation expense

$

14,831

 

$

154,746

 

$

27,503

 

$

196,171

DYNATRACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

 

 

September 30,

2020

 

March 31,

2020

 

(unaudited)

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

248,437

 

 

$

213,170

 

Accounts receivable, net

110,251

 

 

157,058

 

Deferred commissions, current

41,190

 

 

38,509

 

Prepaid expenses and other current assets

61,261

 

 

61,188

 

Total current assets

461,139

 

 

469,925

 

Property and equipment, net

33,920

 

 

31,508

 

Operating lease right-of-use asset, net

42,571

 

 

 

Goodwill

1,271,602

 

 

1,270,733

 

Other intangible assets, net

175,789

 

 

201,592

 

Deferred tax assets, net

24,449

 

 

20,460

 

Deferred commissions, non-current

38,074

 

 

39,736

 

Other assets

8,616

 

 

8,126

 

Total assets

$

2,056,160

 

 

$

2,042,080

 

 

 

 

 

Liabilities and shareholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

8,185

 

 

$

11,112

 

Accrued expenses, current

84,498

 

 

93,728

 

Deferred revenue, current

349,541

 

 

384,060

 

Operating lease liabilities, current

9,311

 

 

 

Total current liabilities

451,535

 

 

488,900

 

Deferred revenue, non-current

44,647

 

 

60,711

 

Accrued expenses, non-current

18,308

 

 

20,987

 

Operating lease liabilities, non-current

37,817

 

 

 

Long-term debt

480,941

 

 

509,985

 

Total liabilities

1,033,248

 

 

1,080,583

 

Commitments and contingencies

 

 

 

Shareholders' equity:

 

 

 

Common shares, $0.001 par value, 600,000,000 shares authorized, 282,023,558 and 280,853,040 shares issued and outstanding at September 30, 2020 and March 31, 2020, respectively

281

 

 

281

 

Additional paid-in capital

1,609,246

 

 

1,573,347

 

Accumulated deficit

(563,376

)

 

(594,026

)

Accumulated other comprehensive loss

(23,239

)

 

(18,105

)

Total shareholders' equity

1,022,912

 

 

961,497

 

Total liabilities and shareholders' equity

$

2,056,160

 

 

$

2,042,080

 

DYNATRACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited – In thousands)

 

Six Months Ended

September 30,

 

2020

 

2019

Cash flows from operating activities:

 

 

 

Net income (loss)

$

30,344

 

 

$

(466,489

)

Adjustments to reconcile net income (loss) to cash provided by (used in) operations:

 

 

 

Depreciation

3,797

 

 

3,971

 

Amortization

26,032

 

 

29,810

 

Share-based compensation

27,503

 

 

196,171

 

Deferred income taxes

(3,160

)

 

(48,566

)

Other

802

 

 

3,450

 

Net change in operating assets and liabilities:

 

 

 

Accounts receivable

49,353

 

 

29,578

 

Deferred commissions

1,250

 

 

(2,196

)

Prepaid expenses and other assets

(4,944

)

 

(519

)

Accounts payable and accrued expenses

(7,862

)

 

27,101

 

Operating leases, net

523

 

 

 

Deferred revenue

(62,789

)

 

9,461

 

Net cash provided by (used in) operating activities

60,849

 

 

(218,228

)

 

 

 

 

Cash flows from investing activities:

 

 

 

Purchase of property and equipment

(6,400

)

 

(9,758

)

Capitalized software additions

(184

)

 

(564

)

Net cash used in investing activities

(6,584

)

 

(10,322

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Proceeds from initial public offering, net of underwriters' discounts and commissions

 

 

590,297

 

Settlement of deferred offering costs

 

 

(5,000

)

Repayment of term loans

(30,000

)

 

(455,189

)

Contribution for tax associated with reorganization

 

 

265,000

 

Proceeds from employee stock purchase plan

3,592

 

 

 

Proceeds from exercise of stock options

4,829

 

 

 

Equity repurchases

(25

)

 

(145

)

Installments related to acquisition

 

 

(4,694

)

Net cash (used in) provided by financing activities

(21,604

)

 

390,269

 

 

 

 

 

Effect of exchange rates on cash and cash equivalents

2,606

 

 

(1,337

)

 

 

 

 

Net increase in cash and cash equivalents

35,267

 

 

160,382

 

 

 

 

 

Cash and cash equivalents, beginning of period

213,170

 

 

51,314

 

Cash and cash equivalents, end of period

$

248,437

 

 

$

211,696

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

 

 

Three Months Ended September 30, 2020

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

30,711

 

 

$

(1,866

)

 

$

(359

)

 

$

(3,830

)

 

$

 

 

$

24,656

 

Gross profit

137,875

 

 

1,866

 

 

359

 

 

3,830

 

 

 

 

143,930

 

Gross margin

82

%

 

 

 

 

 

 

 

 

 

85

%

Research and development

27,512

 

 

(2,989

)

 

(592

)

 

 

 

 

 

23,931

 

Sales and marketing

56,690

 

 

(6,122

)

 

(578

)

 

 

 

 

 

49,990

 

General and administrative

22,110

 

 

(3,854

)

 

(167

)

 

 

 

(1,339

)

 

16,750

 

Amortization of other intangibles

8,686

 

 

 

 

 

 

(8,686

)

 

 

 

 

Restructuring and other

46

 

 

 

 

 

 

 

 

(46

)

 

 

Operating income

$

22,831

 

 

$

14,831

 

 

$

1,696

 

 

$

12,516

 

 

$

1,385

 

 

$

53,259

 

Operating margin

14

%

 

 

 

 

 

 

 

 

 

32

%

 

Three Months Ended September 30, 2019(1)

 

 

 

 

 

 

 

 

 

 

 

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

39,546

 

 

$

(12,720

)

 

$

(28

)

 

$

(4,243

)

 

$

 

 

$

22,555

 

Gross profit

89,832

 

 

12,720

 

 

28

 

 

4,243

 

 

 

 

106,823

 

Gross margin

69

%

 

 

 

 

 

 

 

 

 

83

%

Research and development

46,596

 

 

(27,379

)

 

(19

)

 

 

 

 

 

19,198

 

Sales and marketing

99,966

 

 

(56,781

)

 

(343

)

 

 

 

 

 

42,842

 

General and administrative

86,953

 

 

(57,866

)

 

(1

)

 

 

 

(14,090

)

 

14,996

 

Amortization of other intangibles

10,061

 

 

 

 

 

 

(10,061

)

 

 

 

 

Restructuring and other

779

 

 

 

 

 

 

 

 

(779

)

 

 

Operating (loss) income

$

(154,523

)

 

$

154,746

 

 

$

391

 

 

$

14,304

 

 

$

14,869

 

 

$

29,787

 

Operating margin

(119

%)

 

 

 

 

 

 

 

 

 

23

%

_________________

(1)

Prior period results have been updated to include the employer payroll taxes on employee stock transactions.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

 

 

Three Months Ended September 30,

 

2020

 

2019

Non-GAAP net income:

 

 

 

Net income (loss)

$

17,479

 

 

$

(417,334

)

Income tax expense

1,949

 

 

248,423

 

Cash paid for tax

(12,418

)

 

(262,020

)

Tax associated with reorganization (1)

14,900

 

 

254,242

 

Related party tax

 

 

7,310

 

Interest expense, net

3,602

 

 

14,534

 

Cash paid for interest

(3,160

)

 

(11,653

)

Share-based compensation

14,831

 

 

154,746

 

Employer payroll taxes on employee stock transactions

1,696

 

 

391

 

Amortization of other intangibles

8,686

 

 

10,061

 

Amortization of acquired technology

3,830

 

 

4,243

 

Transaction and sponsor related costs

1,339

 

 

14,090

 

Restructuring and other

46

 

 

779

 

Gain on currency translation

(199

)

 

(146

)

Non-GAAP net income

$

52,581

 

 

$

17,666

 

 

 

 

 

Share count:

 

 

 

Weighted-average shares outstanding - basic

280,077

 

 

264,127

 

Weighted-average shares outstanding - diluted

286,252

 

 

264,127

 

 

 

 

 

Shares used in non-GAAP per share calculations:

 

 

 

Weighted-average shares outstanding - basic

280,077

 

 

264,127

 

Weighted-average shares outstanding - diluted

286,252

 

 

269,985

 

 

 

 

 

Net income (loss) per share:

 

 

 

Net income (loss) per share - basic

$

0.06

 

 

$

(1.58

)

Net income (loss) per share - diluted

$

0.06

 

 

$

(1.58

)

Non-GAAP net income per share - basic

$

0.19

 

 

$

0.07

 

Non-GAAP net income per share - diluted

$

0.18

 

 

$

0.07

 

_________________

(1)

Non-GAAP net income for the three months ended September 30, 2020 includes $7,510 of cash tax payments made in the first quarter of fiscal 2021 that were related to the reorganization. Reporting these tax payments in the first quarter of fiscal 2021 as related to the reorganization would have resulted in Non-GAAP net income for the three months ended June 30, 2020 of $44,733 instead of $37,223. There is no impact on year-to-date fiscal 2021 Non-GAAP net income.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

 

Three Months Ended September 30,

 

Trailing Twelve

Months Ended

September 30,

2020

 

2020

 

2019

 

Adjusted EBITDA:

 

 

 

 

 

Net income (loss)

$

17,479

 

 

$

(417,334

)

 

$

78,809

 

Income tax expense (benefit)

1,949

 

 

248,423

 

 

(36,893

)

Interest expense, net

3,602

 

 

14,534

 

 

19,392

 

Amortization

13,013

 

 

14,729

 

 

54,679

 

Depreciation

2,207

 

 

1,937

 

 

7,690

 

Restructuring and other

46

 

 

779

 

 

223

 

Transaction and sponsor related costs

1,339

 

 

14,090

 

 

6,563

 

(Gain) loss on currency translation

(199

)

 

(146

)

 

1,219

 

Share-based compensation

14,831

 

 

154,746

 

 

53,810

 

Employer payroll taxes on employee stock transactions

1,696

 

 

391

 

 

2,371

 

Adjusted EBITDA

$

55,963

 

 

$

32,149

 

 

$

187,863

 

 

Three Months Ended September 30,

 

2020

 

2019

Unlevered Free Cash Flow ("uFCF") (After tax adjustment):

 

 

 

Net cash provided by (used in) operating activities

$

23,841

 

 

$

(252,395

)

Cash paid for interest expense

3,160

 

 

11,653

 

Restructuring and other

46

 

 

779

 

Purchase of property, plant, and equipment

(1,982

)

 

(5,607

)

Transaction and sponsor related costs

1,339

 

 

14,090

 

Tax associated with reorganization (1)

14,900

 

 

254,242

 

Related party tax

 

 

7,310

 

Total uFCF

41,304

 

 

30,072

 

Interest tax adjustment

(790

)

 

(2,913

)

uFCF (After tax adjustment)

$

40,514

 

 

$

27,159

 

_________________

(1)

Unlevered Free Cash Flow for the three months ended September 30, 2020 includes $7,510 of cash tax payments made in the first quarter of fiscal 2021 that were related to the reorganization. Reporting these tax payments in the first quarter of fiscal 2021 as related to the reorganization would have resulted in Unlevered Free Cash Flow for the three months ended June 30, 2020 of $44,460 instead of $36,950. There is no impact on year-to-date fiscal 2021 Unlevered Free Cash Flow.

 

September 30,

2020

Adjusted EBITDA/Net Debt Leverage Ratio:

 

Long-term debt

$

480,941

 

Cash

248,437

 

Net debt

232,504

 

 

 

TTM Adjusted EBITDA

$

187,863

 

Leverage Ratio

1.2

x

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except percentages)

 

 

Six Months Ended September 30, 2020

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

59,253

 

 

$

(3,364

)

 

$

(412

)

 

$

(7,656

)

 

$

 

 

$

47,821

 

Gross profit

264,841

 

 

3,364

 

 

412

 

 

7,656

 

 

 

 

276,273

 

Gross margin

82

%

 

 

 

 

 

 

 

 

 

85

%

Research and development

51,017

 

 

(5,407

)

 

(690

)

 

 

 

 

 

44,920

 

Sales and marketing

105,853

 

 

(11,527

)

 

(705

)

 

 

 

 

 

93,621

 

General and administrative

43,637

 

 

(7,205

)

 

(174

)

 

 

 

(2,898

)

 

33,360

 

Amortization of other intangibles

17,372

 

 

 

 

 

 

(17,372

)

 

 

 

 

Restructuring and other

25

 

 

 

 

 

 

 

 

(25

)

 

 

Operating income

$

46,937

 

 

$

27,503

 

 

$

1,981

 

 

$

25,028

 

 

$

2,923

 

 

$

104,372

 

Operating margin

14

%

 

 

 

 

 

 

 

 

 

32

%

 

Six Months Ended September 30, 2019(1)

 

GAAP

 

Share-based

compensation

 

Employer

payroll taxes

on employee

stock

transactions

 

Amortization

of other

intangibles

 

Restructuring

& other

 

Non-GAAP

Non-GAAP operating income:

Cost of revenue

$

69,089

 

 

$

(16,029

)

 

$

(28

)

 

$

(8,800

)

 

$

 

 

$

44,232

 

Gross profit

182,839

 

 

16,029

 

 

28

 

 

 

8,800

 

 

 

 

 

207,696

 

Gross margin

73

%

 

 

 

 

 

 

 

 

 

82

%

Research and development

72,255

 

 

(34,506

)

 

(30

)

 

 

 

 

 

 

 

37,719

 

Sales and marketing

158,181

 

 

(71,885

)

 

(347

)

 

 

 

 

 

 

 

85,949

 

General and administrative

118,835

 

 

(73,751

)

 

(1

)

 

 

 

 

 

(17,954

)

 

27,129

 

Amortization of other intangibles

20,203

 

 

 

 

 

 

 

(20,203

)

 

 

 

 

 

Restructuring and other

894

 

 

 

 

 

 

 

 

 

 

(894

)

 

 

Operating (loss) income

$

(187,529

)

 

$

196,171

 

 

$

406

 

 

 

$

29,003

 

 

 

$

18,848

 

 

$

56,899

 

Operating margin

(74

%)

 

 

 

 

 

 

 

 

 

23

%

(1)

Prior period results have been updated to include the employer payroll taxes on employee stock transactions.

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands, except per share amounts)

 

 

Six Months Ended September 30,

 

2020

 

2019

Non-GAAP net income:

 

 

 

Net income (loss)

$

30,344

 

 

$

(466,489

)

Income tax expense

9,096

 

 

245,480

 

Cash paid for tax

(22,545

)

 

(264,072

)

Tax associated with reorganization

14,900

 

 

254,242

 

Related party tax

 

 

7,310

 

Interest expense, net

7,715

 

 

33,720

 

Cash paid for interest

(6,923

)

 

(27,391

)

Share-based compensation

27,503

 

 

196,171

 

Employer payroll taxes on employee stock transactions

1,981

 

 

406

 

Amortization of other intangibles

17,372

 

 

20,203

 

Amortization of acquired technology

7,656

 

 

8,800

 

Transaction and sponsor related costs

2,898

 

 

17,954

 

Restructuring and other

25

 

 

894

 

Gain on currency translation

(218

)

 

(240

)

Non-GAAP net income

$

89,804

 

 

$

26,988

 

 

 

 

 

Share count:

 

 

 

Weighted-average shares outstanding - basic

279,577

 

 

251,412

 

Weighted-average shares outstanding - diluted

285,423

 

 

251,412

 

 

 

 

 

Shares used in non-GAAP per share calculations:

 

 

 

Weighted-average shares outstanding - basic

279,577

 

 

251,412

 

Weighted-average shares outstanding - diluted

285,423

 

 

258,043

 

 

 

 

 

Net income (loss) per share:

 

 

 

Net income (loss) per share - basic

$

0.11

 

 

$

(1.86

)

Net income (loss) per share - diluted

$

0.11

 

 

$

(1.86

)

Non-GAAP net income per share - basic

$

0.32

 

 

$

0.11

 

Non-GAAP net income per share - diluted

$

0.31

 

 

$

0.10

 

DYNATRACE, INC.

GAAP to Non-GAAP Reconciliations

(Unaudited - In thousands)

 

 

Six Months Ended September 30,

 

2020

 

2019

Adjusted EBITDA:

 

 

 

Net income (loss)

$

30,344

 

 

$

(466,489)

 

Income tax expense

9,096

 

 

245,480

 

Interest expense, net

7,715

 

 

33,720

 

Amortization

26,032

 

 

29,810

 

Depreciation

3,797

 

 

3,971

 

Restructuring and other

25

 

 

894

 

Transaction and sponsor related costs

2,898

 

 

17,954

 

Gain on currency translation

(218)

 

 

(240)

 

Share-based compensation

27,503

 

 

196,171

 

Employer payroll taxes on employee stock transactions

1,981

 

 

406

 

Adjusted EBITDA

$

109,173

 

 

$

61,677

 

 

Six Months Ended September 30,

 

2020

 

2019

Unlevered Free Cash Flow ("uFCF") (After tax adjustment):

 

 

 

Net cash provided by (used in) operating activities

$

60,849

 

 

$

(218,228

)

Cash paid for interest expense

6,923

 

 

27,391

 

Restructuring and other

25

 

 

894

 

Purchase of property, plant, and equipment

(6,400

)

 

(9,758

)

Transaction and sponsor related costs

2,898

 

 

17,954

 

Tax associated with reorganization

14,900

 

 

254,242

 

Related party tax

 

 

7,310

 

Total uFCF

79,195

 

 

79,805

 

Interest tax adjustment

(1,731

)

 

(6,848

)

uFCF (After tax adjustment)

$

77,464

 

 

$

72,957

 

 

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